tv Boom Bust RT August 6, 2014 8:29pm-9:00pm EDT
work from our politicians or from their lapdog the media. i just like to say to the rest of the world that i'm not buying it and hopefully for the sake of even more innocent lives the rest of my countrymen won't buy into these obvious war marketing schemes i heard tonight let's talk about that by following me on twitter at the residence. on marinating in the financial world. to see these developments have not started a family taking credit. in life there are. dramas that can be ignored to. stories others used to know. so it's changing the world right.
to picture. from around the globe. look to. technology innovations all the developments around russia. the future covered. hello there i'm marinating this is boom bust and these are some of the stories that we're tracking for you today. is my favorite day of the week here on boom bust it's tech thursday in a word talking facebook today now the social networking site is having
a tremendous day and better yet a tremendous year we'll look into why and how coming right then steve hanke is on the show now hank you sat down with me to talk about arjen tying debt and there's a bit of it and in today's big deal edward harris and i are covering the latest tech stories from this past week and we're looking into everything from microsoft to amazon from ricin myers the latest acquisition you won't want to miss moment and it all starts. with. our lead story today. now why i have consistently and loudly voiced my opinion about facebook i'm not a fan today i'm giving them nothing but congratulatory three is thursday facebook
stock skyrocketed as much as seven point six percent to an intraday high of almost seventy seven dollars giving the company a total market cap of one hundred ninety seven billion dollars that's equivalent to the combined values of both u.b.s. and american express so yeah it's not small now when measured by market cap facebook is now the fourteenth most valuable company on the s. and p. five hundred and in order to surpass a market capitalization of two hundred billion dollars the stock would need to be at seventy seven dollars and ninety four cents trade. at that number which you could very well do now facebook stock is up more than one hundred eighty percent over the past year and the social network has been lifted to new heights thanks to better than expected quarterly results improved user growth and mobile advertising about sixty two percent of facebook's ad revenue now comes from advertising on mobile devices which according to the markers are expected to eclipse newspapers
magazines and radio in the u.s. for the very first time this year so bottom line facebook naysayers can now eat their words myself included because it's pretty clear that facebook has successfully transformed itself into a. juggernaut and in reality facebook is probably even bigger than we think the company actually has more than two point two billion active monthly users across its flagship properties including what's out there instagram and messenger now the total facebook incorporated user base has roughly doubled in only one year's time so basically one in every three humans on the planet are on facebook but hold the door my dear friend and colleague edward harrison things facebook isn't all that in fact he believes it's bubble licious my word not his so why does ed think it's bubble licious because it's a large market cap stock in fact it's the fourteenth most valuable stock in the s.
and p. five hundred doesn't mention before and its value exceeds about two thirds of the top stocks on the dow jones industrial get at the same time it has a price earnings multiple of nearly one hundred times which would mean it would have to have tremendous and i mean tremendous growth in order to justify that multiple and provide a decent i mean even kind of decent return to invest to investors so to quote ed basically facebook is like cisco circa one thousand nine hundred eighty nine. argentina is facing some serious debt problems and they have until the end of the month to figure it all out now this isn't the first time that this is happening argentina and fact argentina defaulted on the debt as recently as twelve years ago so why do people even keep buying argentine debt anyway to get
a better handle on what's going on in argentina i sat down with dr steve he's a professor of applied economics at the john hopkins university in baltimore and a senior fellow with the cato institute i first asked him if argentina even actually has the money to pay back its bondholders here's what he had to say. well it has the money to pay but could the so-called hold. never agreed to the swap and. in which the old bonds were swapped for new ones and there was a haircut of about sixty three percent of those at about ninety three percent of the people holding the obama agreed to the swap so there were roughly seven percent who did not. and there are. roughly shall we say fifteen billion dollars and argentina could pay the. so argentina could pay if they wanted to essentially
yes it's a it's a matter of ability to pay is there a willingness as. and this is this is more or less always been the game in argentina. you know if you shake the flower bed there's usually a little flower left in the but again they have got some money and they're not willing to give it up so that's that's been pretty much the history of argentina for a couple hundred years they've been in default on bonds and their creditors about thirty five percent of the time so that's that's an incredible number actually. it certainly is it's a record for not a very good thing to hold the record for now when i ask you where is the argentine economy headed. down the economic policies there have been a. complete disaster really since they gave up and started breaking the rules of convert ability so this would go back before the
actual default on the bonds this would go back and in one thousand nine hundred nine they started breaking most of their own rules around the convert ability system that linked the peso to the dollar and then. eventually we've had many years with kirshner's and power and it's been one. irrational economic policy after the other so the economy's quiet vulnerable and i think if they don't default on the bonds economy of probably shrink by maybe a percent and i have for something this year if they default who knows it could go down by two and a half percent three percent in terms of a contraction which is a very severe. depression actually. no the default here is the result of a u.s. supreme court ruling on pretty debt held by restructuring holdouts as equal to that
held by people who participated in a restructuring years ago now you mention this briefly before but can you explain the reasoning here of the chords on the you know perry past sue debt clause that focusing on the parapets you part well that simply means that insured all of bondholders have to be treated equally so. the judge ruled and was upheld on appeal the u.s. judge that is the u.s. courts. if any payments were made to those ninety three percent of the bond holders who in two thousand and five swapped their old for new with a haircut so for its involved the payments would have to be made to the seven percent they would have to be made whole. in order for the suit provision the whole. insured let me let me summarize here
getting in the illegal we we don't want to do that if we can help it. treating all the bondholders equal with the interpretation of the u.s. courts is that payments made to the. ninety three percent who agreed to the swap would trigger the requirement that the holder would have to be paid no and made and made whole. so do you think the u.s. supreme court decision sets a precedent that will make restructuring like argentina's more difficult. well no i don't i think it would all what will happen is that you had a chaotic default in two thousand and one in argentina and that default led eventually to this agreement in two thousand and five for the debt swap and
it's the chaotic part of the thing the origin times were were ill advised and. in in the policy sphere they were quite irrational too so if they had bad legal advice. they were getting way out ahead of their skis too clever by half kind of a latino thing and they they didn't structure these bonds right in the provisions or were poorly written and as a result of that that's why you have this potential for this huge trigger to go off if they hold sort of paid their fifteen billion dollars then if that occurs on a voluntary basis before the end of two thousand and fourteen that means that that all of people who agreed to the swap they're made whole to do and then the bill runs like one hundred twenty billion or something like that
a very large number which which argentina. they don't have the liquidity is to pay it of course they have the assets if you look at the balance sheet of argentina they could liquidate and privatized a lot of and they probably could end up paying one hundred twenty billion over some period of time but but that's again getting out in the weeds and complicating things i mean they're really in a pickle now because of poor and national a legal advice. yes and a series of very imprudent political judgments on the part of argentina i mean that's the problem. steve i want to move on to ukraine now the u.s. has rocketed up sanctions on russia because of the ukraine crisis and many expect more to come so do you expect more and if so what impact will they have. well. i do anticipate that there will be more sanctions i mean there is just
a drumbeat. on capitol hill and a lesser degree in brussels but in general there is pressure to ramp up saying sions and the just how hard those by depend on the nature of the sanctions i mean one thing the war mongers in the in the united states would like to close down the ability of the russian banks and financial system to to use u.s. dollar clearing facilities well that would be a crusher but for russia but it also i think would be extremely stupid and irrational for the united states to engage in that kind of thing because basically they're contaminating their own payment system so by by saying oh no this isn't an open system where will decide the politicians that are so popular on
capitol hill will decide who's going to be able to enter the club and on what terms they will be allowed to enter the club. that was dr steve hanke the professor of applied economics to john hopkins university. time now for a very quick break but stick around because when we return a coral denninger is on the program now carl sat down with me to talk about tech where we're balls and security concerns and not space that in today's big deal edward. chris and i are talking all things technology and remember you can see all segments featured in today's show on you tube or you tube dot com plus the best our team and on. dot com slash boom but now before we go to break here are a look at some your cousin that was the bell how long.
i would rather as questions to people in positions of power instead of speaking on their behalf and that's why you can find my show larry king now right here on r.g.p. question or. welcome back to the show now in the next wave of technology seems to be wearables with the mobile phone market reaching saturation companies like google with its recent announcement of the android where are hoping that this new frontier will be the
next area of growth however with various privacy and data concerns wearables might just be another way for consumers to expose themselves i spoke with blogger and author coral dennett girl about what worries him in this new sector and i asked him about privacy issues in wearable technology and light about bull's eye o.-s. security concerns here's what he had to say. the huge problem with wearables on the whole internet of things concept in general and that tuesday if we don't have some kind of reasonable assurance on security i don't want these things anywhere near me . and i'm one of the early adopters if you will when it comes to things like going home automation building my own systems to control my house and the lighting heating air conditioning the pool things like this but the idea that you can have built in by manufacturers these sorts of back doors. is really a problem you don't think about the person is walking around with some kind of
a fitness tracking device on the wrist all day long that's monitoring your blood pressure and there are you know their heart rate things like this that data is incredibly valuable to people who might want to use it and you know you say well you know who would really care about that well your health insurance company might care. they also might be very interested in the g.p.s. track from your phone to the shows you going past and into liquor stores for example there's a thousand uses for this kind of data and it's one thing to grant access to involuntarily it's quite another to have it taken from you without your knowledge or consent. now karl the u.s. economy shrank at a pace of two point nine percent in q one and i've asked a lot of our guests about this because it's a shockingly margin number for an expansion what do you think is going on in the u.s. in the u.s. economy. well i don't believe a lot of the numbers that i see so there is this seasonal adjustment factors
that to deport into some of the government reports are utterly comical so i tend to work off the unadjusted numbers because a lot harder edged them although even there you have to wonder whether the data collection is any good. i you tranquilly was not terribly surprised to see that kind of a contraction but it does mean that the money printing games that have gone on in the credit pumping that has happened within both the u.s. congress and the federal reserve and let's not get this backwards either the fed is the puppet of the government not the other way around. what this is shown is that these policies have an end point where they stop working and we've reached that so now you know people say well the fed is is reducing their or their bond buying their tapering it's going to go away in october and they're doing this because the economy's doing better the truth is they're doing this because the bond laddering systems that are in place and all of the various pension and other funds are
reaching a point where the pain exceeds their ability to tolerate it and so it has to stop but at the same time with our credit expansion as we've had over the last thirty years you're going to see you the truth of what our economic activity has really been over there period of time is not positive at all. so what you've seen in retail sales given your view on the economy. well he tail sales again are driven to a large degree by credit expansion so what you're seeing now is that as that terminates that cycle terminates the ability to drive retail sales expansion also terminates and so we are seeing a slowdown in any area and i think that's going to continue i don't believe to be anyone's you know anyone credible thinks that we can really gets replaced percent g.d.p. growth rates on a five year rolling basis over the next five years and most of the economic projections are being made in the forward views within the stock market and in
other marketplaces are being based upon dist promise i think this is just absolute nonsense. so the fed seems to be more worried about the economy than at bennett let's. still in plain quantities and that's important to remember and the fed funds rate is effectively zero right now so do you think it makes sense for the fed to ease given the state of the economy. no the fed needs to pull the quiddity out of the system it needs to cut this game out stop the bond buying and essentially allow the rates to go where they do the problem you have is that the fed isn't really the driver of this you have to remember that the federal reserve quite sure can only buy and sell things that are government guaranteed that's the charter and that's the law so if the federal government was to run no deficit there would be no bonds for the for the federal reserve to buy when you look at it from the perspective of the top down the problem with monetary policy is coming from the federal government's not coming from the federal reserve we need to stop spending money we
don't have and that's the root cause of those sort of credit expansion cycle that we've seen over the last thirty years we're now to the point where it's not working anymore to goose apparent economic output and so you're going to get want two things either the government's going to stop this in which case we're going to have to pay for all of this expansion that wasn't real or they're going to keep trying to do it it which point somewhere will go from zero contribution to quit to negative contributions and then you end up in a death spiral where it's forced to end and the results are to chat catastrophic on the economy. terrorism guest on our show francis coppola made an interesting observation on twitter recently and she wrote quote regarding the income inequality debate it's very simple and equality between countries is falling inequality within countries is rising so do you think q he has enhanced inequality here in the us. yes but again we're looking at the wrong thing you have to remember that when when
you run a deficit at a as a government what you're doing is to creating the purchasing power of every unit of currency that you have in circulation that's factually what's going on it's an arithmetic thing has nothing to do with what you want to call it so who does that hit first and the answer is that it's the poor in the middle class because they cannot live or up and used again playing that you've been able in order to try to stay ahead of it the very wealthy on the other hand can do those things now of course with this comes risk for everybody that manages to beat this game and become wealthier on paper east there are several would tempt it and find themselves with nothing when the crash comes we saw that during the housing boom and bust we saw during the nasdaq boom and boston will see it again this time there are an awful lot of people who are multi-millionaires written billionaires on paper that in fact have nothing because all of it is manufactured by leverage and when the margin
calls calm they're going to end up bankrupt it happen the last time it will happen again. that was author and blogger coral karl denninger time now for today's big deal. time with edward one you know me on my favorite day of the week tech there is to ensure we're discussing a bunch of the latest tech stories the starboard end first a lot of news coming out of microsoft on wednesday their fiscal fourth quarter performance was released barely meeting the projections of analysts and that doesn't sound too bad but they also just announced massive layoffs so what's happening over microsoft give you the lowdown so basically microsoft. platform shift here will go into the mobile space and computers are last decades technology and microsoft is trying to fight another uphill battle to move into that space
which is now increasingly dominated by. which right on early today by android google system so they're firing a massive number of people even though they just took over nokia nokia employees going to take the brunt of this raid and they're going to try to turn around the ship i don't know how they can do it i think basically microsoft is going to live off their past laurels going to try to do more acquisitions but it's going to be a tough road they're going to like the idea of of this particular period speaking of which thanks for bringing that up i.b.m. and apple big deal coming out there now can we talk about that you know when will this deal really change anything for either company in your opinion i think it's you know it's not really that big a deal from my perspective i think you know this was about the bring your own device type of thing that people bring their own devices to companies and that's really a big problem but once you get ahead of that problem by saying look we have a solution to deal with the corporate environment but you know people are going to
consumers who are actually working companies. i phones anyway it's not really going to add up much juice to i phones i think that the market saturated any was so i don't think it's that big a do ok now amazon officially launched its first mobile wallet application and over the course of this year we've seen major new products from amazon like fire phone and fire t.v. so edward tell me about this what's going on what does this mobile wallet what will it do why is it great to me. the mobile wallet as they introduce it is pretty much nothing. i think it's the first pass for. good in terms of iterations but i was completely underwhelmed of what they're able to do and it's not a big call and it's not like a paper whatever but everyone knows that amazon is getting into the payment space they're good they're putting the marker down for the and i think that they will ramp aggressively into making this a soup to nuts type of
a platform not just for users or but also for companies as well now i want to run to yahoo now earlier this week yahoo announced its plans to buy florrie and app analytics service and it underscores president could possibly be the company's largest acquisition and c.e.o. marissa meyer so big question what is an app analytics service and why would yahoo want basically it's a targeting advertising targeting service so yahoo has really fallen off the wagon here in terms of advertising they've sold out most of their advertising to microsoft where they're trying to do is make it so that they can target ads better have a say the advertisers look stay with us or come to us because we have these analytics and we can definitely target gravitas and better and therefore you should use us over other companies i think it's a very good acquisition for them so that's a positive even though she might break the bank to. make some of the market first off now and to bear what is that hoover i love of her by the way. as we were moves
into asia they're facing different thought. including a possible ban in seoul and getting a handle on beijing's vaccine traffic problems i mean if they can get a handle on that. the sky's the limit so how does a bird launch overseas compares to its service here in the u.s. what do you think. you know it's this when you're an eighteen billion dollars company basically you go to launch everywhere and ultimately what we're going to see is that they're not going to the markets as much as they want in other places get the bin that you're talking about problems and we have all sorts of problems in europe and what we're going to see is that they're not going to get a rep as aggressively as they want and as a result of the growth is going to slow and people will be disappointed we'll see whether the vcs get up before that i say this breaks my heart because i love it over and i know i'm rooting for them to succeed but you say that lift and hello can can service all my needs as well have you ever yeah. just like the out i'm going
today i roll researcher. today on larry king up fifteen year n.b.a. veteran metta world peace what does a better world peace need why do you choose that name it's like the the butterfly you know he said caterpillar the butterfly blossoms and i'm still blossoming of the cold he says he's young i haven't seen him about his cane like this in place i can't wait to see coffee going to carry the team he's going to carry that scene and i believe on his future in basketball i'm not retired i'm just coaching people think that coach i'm tired i'm not retiring this coach ok now you're free agent is there a place you'd prefer to go yeah it is but i guess i'm in trouble plus because i didn't start the mouse at the palace and i was a slut and i thought it was going to you flew off the handle but you know i did so i left the use of a flow of like three full handles on the.